The Time-Series Properties of House Prices: A Case Study of the Southern California Market

Rangan Gupta and Stephen Miller

No 912, Working Papers from University of Nevada, Las Vegas , Department of Economics

Abstract: We examine the time-series relationship between house prices in eight Southern California metropolitan statistical areas (MSAs). First, we perform cointegration tests of the house price indexes for the MSAs, finding seven cointegrating vectors. Thus, the evidence suggests that one common trend links the house prices in these eight MSAs, a purchasing power parity finding for the house prices in Southern California. Second, we perform temporal Granger causality tests revealing intertwined temporal relationships. The Santa Anna MSA leads the pack in temporally causing house prices in six of the other seven MSAs, excluding only the San Luis Obispo MSA. The Oxnard MSA experienced the largest number of temporal effects from other MSAs, six of the seven, excluding only Los Angeles. The Santa Barbara MSA proved the most isolated in that it temporally caused house prices in only two other MSAs (Los Angeles and Oxnard) and house prices in the Santa Anna MSA temporally caused prices in Santa Barbara. Third, we calculate out-of-sample forecasts in each MSA, using various vector autoregressive (VAR) and vector error-correction (VEC) models, as well as Bayesian, spatial, and causality versions of these models with various priors. Different specifications provide superior forecasts in the different MSAs. Finally, we consider the ability of theses time-series models to provide accurate out-of-sample predictions of the decline in the house prices after their peaks in 2005 and 2006. Recursive forecasts, where the sample is updated each quarter, provide reasonably good forecasts of timing of the peak and decline if the house prices.

Keywords: House prices; Cointegration; Temporal causality; Forecasting (search for similar items in EconPapers)
JEL-codes: C32 R31 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2009-03, Revised 2009-12
New Economics Papers: this item is included in nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://web.unlv.edu/projects/RePEc/pdf/0912.pdf First version, 2008 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to web.unlv.edu:80 (No such host is known. )

Related works:
Journal Article: The Time-Series Properties of House Prices: A Case Study of the Southern California Market (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nlv:wpaper:0912

Access Statistics for this paper

More papers in Working Papers from University of Nevada, Las Vegas , Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Bill Robinson ().